Market Showing Surprising Strength

Market Showing Surprising Strength

The housing market has continued to surprise forecasters with prices and sales increasing across the nation. 2013 has been a resilient year; the Canadian Real Estate Board predicts the average sale price will increase to 3.6% this year with another 1.7% in 2014. They are also now forecasting 449,900 sales over the Multiple Listing Service this year, up from the 443,400 figure set in June.

In Vancouver alone, sales increased 52.5% over August 2012; Single family homes increased 69%, condos 40% and townhomes 48%. However, even with this surge in sales the month still remains 4.6% below the 10-year average. Prices are up 2.3% from earlier in the year, but down 1.6% year over year.

In Toronto sales increased 21% from August last year, and surged again to a 29% increase by mid September. Average home prices also gained 5.4%.

Calgary is expected to lead in short-term year-over-year price growth in the housing market. Record breaking luxury home sales continue to push the average sale prices up; August was up 6.3% from July and 26.3% from a year ago.

Predictions are for continued growth, but at a slower pace due to the 30% increase in mortgage rates over the past few weeks.

More highlights from Septembers headlines:

OVERALL

The Canadian economy grew by 1.7% in 2012 and the bank is estimating 1.8% expansion this year.

Analysts has been expecting a big number in August but have cautioned that a year ago was a brutal month for housing in most parts of the country.

The average sale price was up 4.8% on a year-over-year basis, with 80% of the surveyed major markets reporting gains.

In Toronto, the market has been “unusually hot,” says Aleksandra Oleksak, a sales representative at Sage Real Estate Ltd. This past July was the third-best July on record for home sales. “We really expected a huge slowdown,” Oleksak adds, “and in some pockets of Toronto, you’re still seeing multiple offers and bidding wars.” It’s much of the same in Carbonear, Nfld., says the owner of Dream Realty Ltd., Victoria Harnum, whose annual income is set to exceed what she earned last year mid-way through this year. In Calgary, First Place Realty Ltd. associate Bob Truman can’t get to listings fast enough. “If you are taking a buyer out to look at properties, chances are half of them will be sold before you get there to look at them,” he says.Real estate sales aren’t sizzling in every neighbourhood, of course. Since the job market stalled on Vancouver Island in 2008, anything listed for more than $400,000 can sit on the market for at least two years, says broker Debbie Simmonds of Fast Forward Real Estate. “The industry has been hit very hard here.”

The housing market’s surprising strength was on full display in the August data released in September, with sales up 11.1 per cent from a year earlier and prices rising more than economists expected. “Next to no one predicted a big mid-year bounce in home sales at the start of 2013, when calls for Canadian housing market calamity were all the rage,” Bank of Montreal chief economist Doug Porter wrote in a research note. “Contrary to the Greek chorus of woe, sales are now above their 10-year average in seasonally adjusted terms.”

Prices, too, are defying expectations. “The housing market has proven more resilient in 2013 than we had anticipated,” Toronto-Dominion Bank economist Diana Petramala wrote,“The outperformance has been particularly notable on the price side.”

The Ottawa-based Canadian Real Estate Association, which represents about 100 boards across the country, has once again upped its forecast for sales in 2013, citing low interest rates and a strong economy. “Sales after a slow start of the year have improved more than we had projected,” said Gregory Klump, chief economist with CREA. “The increase in the discounted mortgage rate has moved forward activity that would have taken place later in the year.”

CREA is now forecasting 449,900 sales over the Multiple Listing Service this year, up from the 443,400 figure set in June. Before that, CREA had cuts its forecast three times in the face of the protracted sales slump that ensued from the summer of 2012 to this spring, after Ottawa tightened mortgage insurance rules.

August’s sales were 2.8-per-cent higher than July’s, according to the association.

Bank of Montreal economist Benjamin Reitzes noted that the year-over-year numbers appear stronger because the market was plunging at this time last year, but said recent sales levels are nevertheless healthy by historical standards.

Bank of Montreal senior economist Sal Guatieri said in a phone interview Sept. 10. “The market appears to be brushing off the tougher mortgage rules.” A soft landing is when the rate of economic growth slows but remains high enough to prevent a recession.

PREDICTIONS

Bank of Canada: In its quarterly Monetary Policy Report, released on July 17, the bank said growth would be 2.7% in both 2014 and 2015.

Bank of Montreal Chief economist Doug Porter says sales are now close to their 10-year average, even with the comeback we’ve seen. “Sales are not running away. They definitely bare watching but they are not in a situation yet where the government needs to step in and take action,” said Mr. Porter. He says the state of the market will probably be better assessed by October, adding a rising rate environment has just taken a little bit of steam out of the market. “I don’t think it has killed the market,” said Mr. Porter. “I think the real story is sales will be flat for the year and nobody predicted that at the beginning of the year, they were heading down for the count,” said Mr. Porter.

McLister told the Financial Post that CMHC’s stricter cap would amount to roughly 20 basis points or 0.2% percentage points on a five-year mortgage and “won’t have a real dampening effect on credit.”

The strength of pricier markets such as Vancouver is pulling average prices higher than expected. The CREA expects the national average home price will rise 3.6 per cent this year to $376,300. In 2014, prices are forecast to inch up another 1.7%.

Benjamin Reitzes: “However, the improvement in activity over the past few months probably won’t be sustained, as mortgage rates have jumped nearly one percentage point which will weigh on activity later this year,” he added.

“There’s no question that the interest rates of today are sustaining these high prices,” said Bill Binnie, a Vancouver-based broker at Royal LePage, the largest real estate brokerage in Canada by sales, in a Sept. 11 telephone interview. “But we see immigration and the foreign buyers come in, so we have confidence the housing market will be good.” This year’s sales figures across Canada will be better than in 2012, he said.

“The average price in Calgary is forecast to increase almost six per cent this year to $435,000,” said Richard Cho, senior market analyst in Calgary for Canada Mortgage and Housing Corp., about the census metropolitan area. “Part of the gains in the average price thus far is due to the high number of luxury homes sold this year. There has also been more pressure on prices as active listings have moved lower as well as days-on-market. Price growth is expected to continue into 2014 but at a more modest pace.”

VANCOUVER

The Real Estate Board of Greater Vancouver said they were 2,514 sales via the Multiple Listing Service last month, a 52.5% increase from a year ago.

To put the Vancouver market in context, last month’s major rebound still leaves sales 4.6% below the 10-year average for the month. August sales were also 14.7% below July figures.

Prices also showed stability with the benchmark price, the average for typical homes sold across all property types, hit $601,500 in August, which was 1.6 per cent below the same month a year ago, but up 2.3 per cent from the beginning of the year.

The overall inventory of homes hit 16,027 in August, down 8.8 per cent from the level in August 2012 even though there was an uptick of new listings during the month. August’s sales-to-active-listings ratio of 15.7 per cent

Real Estate Board of Greater Vancouver results

Sales of single-family homes were 1,052 in August, up 69 per cent from the same month a year ago and the benchmark price was $923,700, down two per cent from August 2012.

Sales of condo properties were 1,018 in August, up 40 per cent from the same month a year ago and the benchmark price was $366,100, down one per cent from August 2012.

Sales of townhouse properties were 444 in August, up 48 per cent compared with the same month a year ago and the benchmark price was $457,000, down one per cent from August 2012.

“I don’t think there’s going to be blocks of houses on fire,” says Vancouver, B.C.-based McLister. “Nothing’s really convinced people that a crash is imminent.” He cites growing employment and wage stability, near-rock-bottom lending rates and consistent demand from immigrants and first-time buyers as key reasons why the market hasn’t wavered. Affordability, which is heavily dependent on low interest rates and lending flexibility, is almost the same or better than 20 years ago, according to the Bank of Canada’s Housing Affordability Index. Fear, he says, has helped deter people from “doing stupid things.”

The board’s Home Price Index composite benchmark price for all residential properties was $601,500, a 1.3% decline from a year ago but a 2.3% jump from the beginning of 2013.

Vancouver is the most expensive city to buy a home nation-wide, with an average cost of about $780,500, higher than in London and New York. The equivalent in Toronto is $523,147, according to the Canadian Real Estate Association. That compares with New York’s $779,000 average in the second quarter and 438,000 pounds ($702,289) in London in July.

TORONTO

Sales in Toronto, the largest market, rose 21% from August last year to 7,569 units, the Toronto Real Estate Board said in a statement, with average prices gaining 5.4%.

The average price of a home sold in Toronto was $503,094 in August, the Toronto realtors group said.

Some of the strongest growth numbers were seen in Toronto’s beleaguered condo sector last month where sales were up 20.1 per cent across the GTA — 21.4 per cent in the City of Toronto — and prices climbed by 3.7 per cent year over year.

TREB attributed the sales increases to the fact that buyers have now adjusted to the more stringent lending rules, saved up bigger deposits and “have reactivated their search for a home.” But there are other factors at play as well: There is growing confidence, although still considerable wariness, that the market is holding up far better than most observers had expected a year ago.

House hunters have also grown anxious that prices have only continued to climb while they’ve been watching from the sidelines since last summer.

House sales skyrocketed by 29 per cent year over year across the GTA as of mid-September, with the highly watched condo sector leading the way, according to figures released by the Toronto Real Estate Board Tuesday.

Condo sales were up 36 per cent across the GTA – 42.6 per cent in the City of Toronto – with prices up 2.4 per cent over mid-September of 2012, spurred on largely by recent increases in fixed-rate mortgages and buyers rushing to get into the market before 90- and 120-day mortgage pre-approvals expire.

The average sale price in the City of Toronto now stands at $531,388, down from $534,782 as of mid September of 2012. That compares to $504,909 in the 905 regions, up from $473,031 at this time last year.

Detached homes across the GTA saw a 27.3 per cent increase in sales and 5.2 per cent climb in prices. Semi-detached home sales were up 29 per cent as of mid September and prices down 2.7 per cent, lead largely by an almost five per cent decline in the City of Toronto.

Townhome sales climbed almost 30 per cent, while prices were up 9.2 per cent in mid September.

August new condominium sales in the Greater Toronto area were the worst in a decade and are now 46% below the long-term average, says the Building Industry and Land Development Association.

Sales along low rises were the third lowest in 10 years and 43% below the long-term average. Land shortages were blamed for the weak sales, a statement BILD said is supported by a price index which saw low rises reached a record of $658,938.

CALGARY

Calgary’s red-hot housing market was sizzling in August as records were set for the most luxury home sales ever for the month, the highest median and average sale prices for the month and the second highest ever total MLS sales during the month.

According to the Calgary Real Estate Board, total MLS sales for August of 2,196 in the city were up 27.53 per cent from last year; the average price rose by 8.80 per cent to $453,752; the median price increased by 6.40 per cent to $399,000; new listings were up by 7.39 per cent to 2,774; active listings were down by 24.81 per cent to 3,898; and days on market to sell fell by 17.78 per cent to 37.

Grace Yan, a realtor with RE/MAX Real Estate (Central) in Calgary, said the real estate market rapidly changes from week to week. “It is currently quite a strong sellers’ market. We are seeing properties go on the market then within a day will be sold with competing offers and at times I have seen properties that have gone competing offers and sold for $100,000 over list price,” she said, adding good properties that are listed at market value are sold quickly. “We are finding that the market is currently buoyant due to the small ratio of listings. We still have quite a few people relocating to Calgary due to a strong job market and strong economy. Prices continue to rise as there is currently high demand and low supply of housing inventory. So when those good properties come on the market they are being snapped up fast.”

Richard Cho, senior market analyst in Calgary with Canada Mortgage and Housing Corp., said many existing homeowners have taken advantage of the rise in home values by selling their house and using the equity gains towards a luxury home. In addition, rising incomes and relatively low mortgage rates have also helped buyers purchase higher-priced homes,” he said.

According to the Calgary Real Estate Board, year-to-date for just the city, there have been 17,933 MLS sales, up 9.33 per cent from the same period a year ago. The average sale price has jumped by 6.93 per cent to $456,779 but new listings are down 0.8 per cent to 25,943.

Calgary and area is forecast to lead the country in short-term year-over-year price growth in the housing market, according to a report released Friday by the Conference Board of Canada. The report said prices in the Calgary region are expected to rise by seven per cent or more. The board’s report said Calgary is now in a sellers’ market.

The board said the seasonally-adjusted annual rate of sales in Calgary of 33,264 in August was up 6.3 per cent from the previous month and a 26.3 per cent hike from a year ago.

The pace of luxury home sales outside Calgary are strong this year but not as active as what’s been happening in the city where the market is setting records at a torrid clip.

“The Calgary luxury home areas such as Britannia, Mount Royal, Elbow Park, Eagle Ridge, Bel Aire, Elboya and the downtown core are considered recession-proof in our opinion being that they are within a 10-minute drive to downtown, are within walking distance to amenities, the arts, cultural and sporting events and empty nesters from the outlying areas always seem to move into the city from acreages once they retire or their children are off to university.”